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General Body Meeting 03.10.11

General Body Meeting 03.10.11. Agenda. News Updates Macro Sector Pitch. News Updates. Japanese Earthquake. Friday, March 11: Magnitude 9.0 Earthquake Up to 30 feet tsunamis Official Count: 15,000 Dead/Missing More feared Support Pouring In. Market Impact. US Market Impact. JPY Impact.

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General Body Meeting 03.10.11

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  1. General Body Meeting 03.10.11

  2. Agenda • News Updates • Macro Sector Pitch

  3. News Updates

  4. Japanese Earthquake • Friday, March 11: Magnitude 9.0 Earthquake • Up to 30 feet tsunamis • Official Count: 15,000 Dead/Missing • More feared • Support Pouring In

  5. Market Impact

  6. US Market Impact

  7. JPY Impact

  8. Moving Forward? • Artificially Stimulating Economy • Impact on Japanese Debt • Impact on Various Companies • Impact on Nuclear Industry

  9. Human Genome Sciences (HGSI) • FDA approved first medication for the treatment of lupus in last 55 years • Lupus is an inflammatory disease where antibodies in the immune system attack joints, skin, kidneys, lungs, the heart, and even the brain • Drug called BENLYSTA • BENLYSTA (injected) blocks antibodies from attacking organs

  10. HP Updates • CEO Apotheker laid out his strategic vision for HP on March 14th during his first appearance before the technology press ,focusing on: • Cloud-computing • Seamless connectivity among devices • HP application store • WebOS: • HP will deliver 100M WebOS-enabled devices per year (tablets, phones, printers, PCs…), i.e. an integrated ecosystem

  11. HP Updates Continued… • WebOS: • HP WebOS tablet will ship in June • Promote WebOS development aggressively • Acquisitions: • Vertica acquisition set to close soon, a good sign • Possible future acquisitions of other software companies • HP to boost quarterly dividend by 50%, from 8 to 12 cents

  12. HP Updates Continued… • Analysts’ Opinions: • “The consensus was that what investors really wanted to hear today was direction for HP and confidence in a plan. We got both today.” • “Apotheker’s changes should yield $7/share earnings by 2014, up from $4.58 in 2010” • “HP, which recently set a long-term goal of $7 per share in EPS, should easily hit $6 per share next year” –Credit-Suisse Analyst, with an Outperform rating on HP

  13. HP Summary • Analyst day was success in presenting HP’s future strategy. • Short-term price performance hit by macro-conditions, but bullish in long-run • Analysts believe that HP will outperform. “HP has “lots of room for growth in IT services, which are currently under-consumed around the world” • Recommendation: HOLD

  14. Media SectorThe Walt Disney Company

  15. Thesis • Growth across segments • Diversified, stable company • Global push

  16. Company Overview • Diversified worldwide entertainment company • 5 business segments • Media Networks • Parks & Resorts • Studio Entertainment • Consumer Products • Interactive Media

  17. Company Overview

  18. Company Overview

  19. Media Networks

  20. Parks & Resorts

  21. Studio Entertainment

  22. Studio Entertainment

  23. Consumer Products

  24. Interactive Media

  25. Management • Robert Iger – President & CEO • Joined in 1974 • James Rasulo • Joined in 1986 • Chase Manhattan • Marriott • Kevin Mayer • Partner, L.E.K. Consulting • CEO, Clear Channel Interactive • CEO, Playboy.com

  26. Industry Overview • Diversified Entertainment • Macro Drivers: • GDP • Disposable Personal Income • Consumer Expenditures • Consumer Price Index • Consumer Confidence • Slow albeit positive growth with company specific catalysts driving performance

  27. Catalysts – Media Networks • ESPN – BIG Winner • Ratings up 40% yoy • Ad Revenue up 34% yoy • More growth on the way with cross-platform consumption • Demand for live content • ESPN 3D • Barcap: “ESPN has least revenue risk in the event of a lockout.”

  28. Catalysts – Parks & Resorts • Shanghai Disneyland Resort opening 2014/5 • 2.7 sq. mile tourist destination • $3.7 billion projected cost • Expected yearly visitors at opening: 7-10 million • Possible operations by Oriental Land Co. • Operates Tokyo Disney – very popular • All lessons learned from HK & Tokyo will be applied in Shanghai • GS very bullish on park – comparable to Macau’s transformation of gambling industry • Yuan appreciation positive for profit repatriation

  29. Catalysts – Parks & Resorts • Heavy marketing efforts prior to opening • 5000 Retailers • Disney Stores opening in 2012 • Upscale shopping centers • Aiming to deliver the best 30 minutes of a child’s day • Whet consumer appetite

  30. Catalysts – Parks & Resorts • Expansion on the High Seas • 2 new cruise ships will enter Disney fleet by 2012 • 4000 passenger capacity/ship • 150% cruise capacity increase • Est. $250 million increase in annual profit • Cruise industry expected to have strong years ahead

  31. Catalysts – Studio Entertainment • Disney’s purchase of Marvel unlocks many popular franchises to complement its current portfolio • Iron Man franchise • Incredible Hulk • Thor • Immense cross-selling opportunities • Will lead to growth in other business segments

  32. SWOT • Market Leader • High brand equity worldwide • Diversified yet integrated businesses • Cross-selling opportunity

  33. SWOT • Overweight in U.S. market • Limited growth as consumers are wary to spend on entertainment • Studio Entertainment, while most profitable has not seen growth and is expected to decline as % of overall business

  34. SWOT • Global push – Disney in Shanghai will drive much growth in the franchise • Planning “Fantasyland” within Magic Kingdom, attracting more visitors and revenues • Innovation in ESPN content delivery shows promising growth

  35. SWOT • NFL lockout could hurt Disney’s revenues • Partial hedge written into contract • Regulation may prevent cross-selling abroad (i.e Disney movies cannot be played in theatre without permission by Chinese film board) • Fierce competition amongst theme parks: Paramount Parks, Universal Studios, and Six flags are all major competitors with cheaper prices

  36. Financial Overview • Current Share Price: • Market Capitalization: 77.14 B • Trailing P/E: 17.92 • In line with industry: 17.33 • Forward P/E: 13.74 • ROA: 6.46% • ROE: 12.36% • D/E: .26 • Current Ratio: 1.1

  37. Financial Overview - Risk

  38. Financial Overview

  39. Financial Overview - Valuation • DCF • Hybrid Sum of the Parts • Growth Rates • Higher growth in more profitable businesses • Perpetuity growth: 3.5-5% • Implied Price Per Share: $ 41.78 – 55.28

  40. Technical Analysis

  41. Recommendation • Buy 50 shares at ~ $ 2030 • Bull Call Spread • Buy 45 call expiry Jan ‘12 • Sell 50 call expiry Jan ‘12 • Time Horizon 2-4 Years

  42. Questions?

  43. Thanks for coming by! HAPPY ST. PATRICK’S DAY! HAVE A GREAT SPRING BREAK

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